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Ukraine’s steel — waiting for justice / Украинская сталь — дожидаясь правосудия

ID (артикул):
3847
Автор:
Количество страниц:
25
Язык отчета:
Английский
Дата выпуска:
02.09.2010
Способ предоставления:
В электронном виде
Формат исследования:
Word

Recent stabilization in the global environment should make an impact on the domestic steel sector. Less negative news on the property market in China and positive movements regarding European debt concerns give domestic steel-makers a chance to end the year not so bad. A decline in the price of iron ore in China, after some capacities were withdrawn from the market, should make the input and output prices of steelmakers more balanced, while an expected global restocking cycle should fuel demand and result in an increase in output. Despite some livening in 3-4Q10, we do not regard domestic steelmaking companies as the best investment targets due to expected weak financial results because of the deterioration of steel markets and outstripping growth in raw materials for most of the year.  

 

Executive summary

 

Macro environment becomes more stable. Of late, news flow from the most alarming regions that affect the global economy and appeared to be less negative and even promising. The Committee of European Banking Supervisors reported that only a few banks have failed to pass a stress test, which suggests that the European economy is quite immune to future economic downturns. On the other hand, China’s policy in the property market will have only a limited effect on the whole Country's economy, thus on its steel market. Positive movements in the macro picture forced the IMF to increase global GDP growth.

 

We expect cost pressure to slacken in 3-4Q10. Introduction of a new iron ore pricing system in 2Q10 replaced yearly contracts by quarterly ones. Iron ore prices on China’s spot market should now serve as a new benchmark. Shutdown of some steel production capacities all over the globe and especially in China, combined with the growth of its production within China, decreased demand for iron ore and exert downward pressure on its prices.

 

Steel prices should rebound in 2H10. With the growth in 4M10, steel prices since then have dropped by almost a quarter. We believe that steel prices are now ready for a turnaround. Driven by a global restocking cycle and an increase in business activity in the Middle East, steel prices should eventually post a 30% growth for the whole year. 

 

Domestic steel output should retrace along with the prices. Driven by higher demand and export prices, domestic steelmakers should step up their production volumes. We believe Ukraine’s companies will be able to increase their steel output in 2010 by 11.5%.

 

Valuation based on DCF and comparative methods shows most of the Ukraine’s steelmakers are now trading in line with the market. From the four companies we recommend to HOLD shares of Mariupol Illich ISW, Alchevsk ISW and Azovstal and SELL shares of Yenakievo ISW.

Содержание:

 Valuation summary..................................................................................... ...........3

Cost pressure to ease in 2H10................................................................. ...........................12

Steel prices – hopeful in 3Q-4Q 2010 ..................................................... ...........................13

Companies’ profiles

Ukraine’s steel market — a time of change................................................... .....................14

Output should rebound when prices go up............................................... ..........................15

Alchevsk ISW [ALMK UK]............................................................................. ......................19

Azovstal [AZST UK].................................................................................... .........................21

Maiupol Illich ISW [MMKI UK]................................................................... ...........................17

Maiupol Illich ISW DCF model........................................................................ .......................4

Alchevsk ISW DCF model.............................................................................. .......................5

Azovstal DCF model..................................................................................... .........................6

Yenakievo ISW DCF model.......................................................................... .........................7

Global steel market

Macro environment looks less gloomy....................................................... .........................11

Comparative valuation.................................................................................. .........................8

 

Domestic steel market

Yenakievo ISW [ENMZ UK]........................................................................ ..........................23

 

Список таблиц, диаграмм, графиков:

 

Figure 1. Key figures

Figure 2. DCF valuation

Figure 3. DCF valuation

Figure 4. DCF valuation

Figure 5. DCF valuation

Figure 6. Comparative valuation

Figure 7. Compound fair price

Figure 8. 2009 world steel output by region, %

Figure 9. China steel consumption breakdown,%

Figure 10. IMF global GDP forecast, %

Figure 11. Iron ore prices in China, USD/tone

Figure 12. China crude steel ouput, mln tones

Figure 13. China iron ore output, thsd tones

Figure 14. Steel prices in China, USD/tone

Figure 15. China steel inventories, mln tones

Figure 16. 2009 Ukraine's steel output breakdown, %

Figure 17. 2010E Ukraine's steel output breakdown, %

Figure 18. Ukraine's steel output breakdown, %

Figure 19. Steel output by IUD, thsd tones

Figure 20. 2010E Ukraine's steel output, mln tones

Figure 21. Income statement

Figure 22. Balance sheet

Figure 23. Income statement

Figure 24. Balance sheet

Figure 25. Income statement

Figure 26. Balance sheet

Figure 27. Income statement

Figure 28. Balance sheet

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